What Do Profit and Loss Tell Us?

Course Description

Module 5: What do Profit and Loss Tell Us?

Entrepreneurs attempt to direct resources to where they are most valued in society. This means producing goods and services that people want and need at a cost that people are willing to pay. Profit and loss both provide incentives for entrepreneurs to create value and communicate knowledge about the success (or failure) of their attempt to create value. In a market economy the function of profit and loss is to direct the allocation of resources to the most preferred uses of the people in society. This series of lessons explains the role of prices in providing both knowledge and incentives to entrepreneurs.